Japan's factory activity stays firm as output surges in July, PMI shows

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TOKYO, July 24 : Japan's manufacturing activity remained broadly firm in July with output rising at its fastest rate since February 2014, while uncertainty about the Middle East situation continued to weigh on firms, a business survey showed on Friday.

• The S&P Global flash Japan Manufacturing Purchasing Managers' Index (PMI) came in at 54.7 in July, slightly softer than 54.8 in June. A reading above 50.0 indicates expansion, while below that level signals contraction.

• A key sub-index for factory output accelerated further, with the index climbing to its highest level since February 2014. Manufacturers also recorded the sharpest increase in new orders in just over five years, helping drive a moderate expansion in overall new business.

• Service sector growth softened, with the flash services PMI easing to 51.9 from 52.2.

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• Total new export business expanded at the fastest pace in four months as overseas demand for goods improved, while foreign demand for services slipped again.

• Employment across Japan's private sector rose for a 34th straight month, while backlogs of work accumulated at the strongest pace since February's series record.

• Input cost inflation slowed to a three-month low, but output charges rose faster as services firms raised prices at the quickest pace in more than 12 years.

• Usamah Bhatti, economics associate director at S&P Global Market Intelligence, said: "Underlying data showed diverging sector trends, with a stronger expansion in manufacturing contrasting with softer growth in services."

• Firms remained optimistic about the year-ahead outlook, though confidence weakened from June amid uncertainty around the war in the Middle East, especially the impact on energy and raw material prices, as well as supply chain disruption.

• "Manufacturers continued to report efforts to build stocks of goods and raw materials amid ongoing supply chain disruption and higher prices linked to the conflict, despite a slight easing in overall cost inflation over the month," Bhatti said.

• The flash Japan composite PMI rose to 53.1 from 52.8, its highest since February and its 16th straight month above 50.

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